Two-part regulating reserve compensation formulation under energy and ancillary service co-optimization

FERC Order 755 required each RTO/ISO to use market-based mechanisms to select and compensate frequency regulation resources based on a two-part payment methodology, i.e. a capacity payment to keep the capacity in reserve and a performance payments to reflect the amount of work each resource performs in real-time in response to the system operator's dispatch signal. This paper discusses the formulations to accommodate the two-part regulation compensation under co-optimized energy and ancillary service market.